University receiving government grants below 50% fails

University receiving government grants below 50% fails “substantially financed” criteria, losing tax exemption.

Issue

Whether an educational university can claim income tax exemption under section 10(23C)(iiiab) if its government grants do not exceed the 50% threshold of total receipts required by rule 2BBB to be deemed “substantially financed by Government.”

Facts

The assessee-university was established under a State Act and filed its income tax returns for the Assessment Years 2016-17 and 2017-18.
The university claimed a total tax exemption on its income under section 10(23C)(iiiab) of the Income-tax Act, 1961, which is meant for educational institutions wholly or substantially financed by the Government.
During the Assessment Year 2016-17, the government grants received by the university amounted to only 47.85% of its total receipts in the previous year.
During the Assessment Year 2017-18, the government grants plummeted further, accounting for just 9.77% of its total receipts in the previous year.
The Assessing Officer noted that these percentages fell below the clear 50% threshold mandated by rule 2BBB of the Income-tax Rules, 1962.
Consequently, the Assessing Officer rejected the exemption claim and brought the university’s surplus income under the tax bracket.

Decision

The revenue authorities and the court held that as per rule 2BBB, an institution’s government grants must strictly exceed 50% of its total receipts during the relevant previous year to be recognized as “substantially financed by Government.”
The court ruled that since the assessee-university failed to meet this statutory benchmark in both assessment years, it did not qualify under the definitions of section 10(23C)(iiiab).
The decision was finalized in favor of the revenue, confirming that the exemption was rightly denied and the surplus income was legally taxable.

Key Takeaways

Strict Statutory Threshold: Rule 2BBB establishes a hard mathematical line (greater than 50% of total receipts) to define what constitutes being “substantially financed” by the government; qualitative arguments cannot bypass this percentage.
Annual Compliance Check: Exemption eligibility is evaluated strictly on a year-by-year basis, as evidenced by the separate grant calculations for A.Y. 2016-17 and A.Y. 2017-18.
Onus on the Assessee: State-established status alone does not guarantee tax immunity. The burden of proof lies entirely on the educational institution to show its financial dependency matches the strict legal parameters of the Income-tax Act.

IN THE ITAT RAIPUR BENCH

Hidayatullah National Law University

Assistant Commissioner of Income-tax, Exemption^*

Partha Sarathi Chaudhury, Judicial Member
and DR. DIPAK P. RIPOTE, Accountant Member

IT Appeal Nos.690 and 691 (RPR) of 2025
[Assessment years 2016-17 and 2017-18]

MAY 15, 2026

R.B Doshi, CA for the Appellant. CH. Rejeswara Reddy, Sr. DR for the Respondent.

ORDER

Partha Sarathi Chaudhury, Judicial Member.- The captioned appeals preferred by the assessee emanates from the respective orders of the Ld.CIT(Appeals)/NFAC, Delhi dated 17.09.2025 for the assessment years 2016-17 & 2017-18 as per the grounds of appeal on record.

2. All the grounds of appeal for both these years pertains to the grievance of the assessee that it is not entitled for exemption and in denying exemption u/s.10(23C)(iiiab) of the Income Tax Act, 1961 (for short ‘the Act’) in the impugned orders held by Ld. CIT(Appeals)/NFAC.

3. For the Department, these cases were to be argued and represented by the Ld. CIT-DR. However, the Ld. CIT-DR had filed an adjournment petition stating her non-availability in the entire course of week and since, the Ld. CIT-DR is on rotation, hence it was brought to the notice of the concerned Commissioner by separate application by the said Ld. CIT-DR that she would not be able to attend cases before the Bench in the entire week for which, she had been deputed. However, the Commissioner has not provided any alternate arrangement by posting Ld. CIT-DR for this week in absence of the Ld. CIT-DR on rotation. That when the matter was called for hearing, the Ld. Counsel for the assessee was present and both these appeals are assessee’s appeal, therefore, there cannot be any prejudice caused to the assessee due to non-availability of the Ld. CIT-DR when the Department has not bothered to assign Ld.CIT-DR. The Ld. Sr. DR was present and he read out the findings of the A.O as well as the Ld. CIT(Appeals)/NFAC. Accordingly, in the interest of substantive justice, both these matters were heard together on merits and disposed of vide this consolidated order after careful consideration of the documents on record.

4. That there is a factual background pertaining to these appeals which is relevant for the purpose of record and adjudication. That at the outset these matters are absolutely similar and identical on facts and issues, therefore, we shall take up the appeal filed by the assessee in ITA No.690/RPR/2025 for A.Y.2016-17 as the lead case for factual illustration of the matter.

5. The brief facts in this case are that the assessee is a university established in the year 2003 vide Chhattisgarh Rajpatra Prakashan dated 03.05.2003. The University is a creation of State Government Act. The university is established to promote education of law and law related activities in the State of Chhattisgarh. The assessee had filed its return of income for the A.Y 2016-17 declaring a total income of Rs.NIL on 07.06.2017. The case was selected for scrutiny through CASS and statutory notice(s) u/ss.143(2) & 142(1) of the Act were issued to the assessee during the course of assessment proceedings. The assessee had claimed exemption u/s.10(23C)(iiiab) of the Act. That as per the provisions of Section 10(23C)(iiiab) of the Act, the claimant who is university or other educational institution is required to satisfy twin conditions viz. (i) it is existing solely for educational purposes and not for purposes of profit and (ii) it is wholly or substantially financed by the Government. While examining the claim of exemption made by the assessee u/s.10(23C)(iiiab) of the Act, the A.O found that the assessee fulfilled the first condition i.e. the university, exists solely for educational purposes and not for profit, however it does not satisfy the second condition that it was wholly or substantially financed by the Government. The A.O found that the Govt. grants received by the assessee during previous year comes to 47.85% which is below 50% and hence, failed to fulfill requirement of the relevant Section “wholly and substantially financed by the Government”. The A.O completed the assessment rejecting the claim of exemption u/s.10(23C)(iiiab) of the Act and brought the surplus of Rs.8,46,85,647/-to tax.

6. Aggrieved with the order of the A.O, the assessee filed appeal before the first appellate authority viz. Ld.CIT(Appeals)/NFAC, wherein the appellate authority following the ratio laid down by the Hon’ble High Court of Bombay in the case of DIT (Exemptions) v. Tata Institute of Social Science 413 ITR 305 (Bombay) held that the assessee is not eligible for exemption u/s 10(23C)(iiiab) of the Act as Government Grants received by the assessee was 47.85% i.e. below 50% as laid down in Rule 2BBB of the Income Tax Rules, 1962 and it failed to fulfil the requirement of the relevant Section of ‘wholly or substantially financed by the Government’. The CIT(A)/NFAC, therefore, upheld the action of the A.O.

7. Aggrieved by the order of Ld. CIT(Appeals)/NFAC, the assessee filed a writ petition before the Hon’ble High Court of Chhattisgarh, Bilaspur wherein the Hon’ble High Court had set-aside the order of Ld.CIT(A)/NFAC and directed the assessee to appear before the Appellate Authority and that the appeal to be decided within a period of 45 days from the date of hearing of the appeal.

8. The present order by the Ld. CIT(Appeals)/NFAC is the impugned order before us passed in accordance with the remand proceedings by the Hon’ble Jurisdictional High Court wherein the matter was restored to the file of the First Appellate Authority as afore-stated.

9. The assessee had filed detailed written submissions before the Ld. CIT(Appeals)/NFAC which is on record and forming part of the order of the First Appellate Authority. The Ld. CIT(Appeals)/NFAC after considering the submissions of the assessee, assessment order and most importantly directives of the Hon’ble High Court observed and held as follows:

“5.0 DESICION:

5.1 The appellant has raised a total three grounds of appeal in original Form 35 and further raised additional grounds of appeal before the present CIT(A).

5.2. I have considered the assessment order. grounds of appeal, submissions of the appellant, CIT(A) order, Order of Hon’ble High Court of Chhattisgarh and the material on record. The appellant in ground 1 has stated that the learned AO erred in the rejection of exemption of section 10(23C)(iiiab) and treating the surplus of Rs.8,46,85,647/- as income of the appellant which is unreasonable and unwarranted and bad in law.

5.3. In this connection, the provisions of Section of section 10(23C)(iiiab) of the Act at the relevant of point of time is as under –

Incomes not included in total income.

10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(23C) any income received by any person on behalf of—

(i)

(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or”

5.4. Rule 2BBB of the Income tax Rules, 1962 inserted by the Finance (No.2) Act, 2014 which came into existence w.e.f. 12.12.2014 is as under –

“Percentage of Government Grant for considering university, hospital, etc., as substantially financed by the Government for the purposes of clause (23C) of section 10.

2BBB. For the purposes of sub-clauses (iiiab) and (iliac) of clause (23C) of section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.'”

5.5. Vide Finance (No.2) Act, 2014, the amendment to section 10(23C)(iiiab) is as under –

FINANCE (NO. 2) ACT, 2014

[No. 25 of 2014]*

An Act to give effect to the financial proposals of the Central Government far the financial year 2014-2015.

BE it enacted by Parliament in the Sixty-fifth Year of the Republic of India as follows:—

CHAPTER I

PRELIMINARY

Short title and Commencement.

1. (1) This Act may be called the Finance (No. 2) Act, 2014.

(2) Save as otherwise provided in this Act, sections 2 to 71 shall be deemed to have come into force on the 1st day of April. 2014.

Amendment of section 10. 5. In section 10 of the Income-tax Act, with effect from the 1st day of April, 2015,—

(a)

in clause (23C),—

(i)

after sub-clause (iiiac), the following Explanation shall be inserted, namely:—

“Explanation.—For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government kg any previous year, if the Government grant to such university or other educational institution. hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.”,

(ii)

after the seventeenth proviso, the following proviso and the Explanation shall be inserted, namely:—

‘Provided also that where the fund or institution referred to in subclause (iv) or the trust or institution referred to in sub-clause (v) has been notified by the Central Government or approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause via), has been approved by the prescribed authority, and the notification or the approval is in force for any previous year, then. nothing contained in any other provision of this section [other than clause (1) thereof] shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be. from the total income of the person in receipt thereof for that previous year.

Explanation.—In this clause. where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year;’;

5.6. Vide Circular No.1/2015 [F.NO.142/13/2014-TPL], dated 21-12015, CBDT has

issued explanatory notes to the provisions of Act as under –

FINANCE (NO.2) ACT, 2014 – EXPLANATORY NOTES TO

THE PROVISIONS OF SAID ACT

CIRCULAR NO.1/2015 [F.N0.142/13/2014-TPL], DATED 21-1-

2015

6. Clarification in respect of section 10(23C) of the Income-tax Act

6.1 The provisions of sub-clause (iiiab) and (iiiac) of section 10(23C) of the Income-tax Act provide exemption, subject to various conditions, in respect of income of certain educational institutions, universities and hospitals which exist solely for educational purposes or solely for philanthropic purposes, and not for purposes of profit and which are wholly or substantially financed by the Government.

6.2 Absence of a definition of the phrase “substantially financed by the Government” had led to litigation and varying decisions of judicial authorities who had, for this purpose, relied upon various other provisions of the Income-tax Act and other Acts. Thus, there has been lack of certainty in this regard.

6.3 Therefore, clause (23C) of section 10 has been amended by inserting an Explanation below sub-clause (iiiac) of the said clause. It provides that if the Government grant to a university or for that previous year. Vide notification No.79 /2014 dated 12.12.2014, Rule 2BBB has been other educational institution, hospital or other institution referred to in section 10(23C)(iiiab) or 10(23C)(iiiac) during any previous year exceeds a prescribed percentage of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government inserted in the Income-tax Rules. The said Rule provides that any university or other educational institution, hospital or other institution referred to in sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10 of the Income-tax Act shall be considered as being substantially financed by the Government for any previous year if the Government grant to such university, hospital, or institution exceeds 50 per cent of its total receipts, including any voluntary contributions, during the said previous year.

6.4 Applicability:—This amendment takes effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years.

5.7. It is apparent from the above circular that the amendment takes effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent assessment years. Rule 2BBB of the Rules and amendment to section 10(23C)(iiiab) of the Act is effective for the A.Y. 2015-16 i.e. the year under consideration which is evident from Circular No.1/2015 [F.No.142/13/2014-TPLI, dated 21-1-2015.

5.8. Further, the appellant in the rejoinder to remand report submitted the Statement of year-wise grants received as a percentage of total receipts (including value of grant). On perusal of the same, it is noticed that the total % of grants to receipts stands at 47.85% for the AY 2016-17 which is below 50% as laid down in Rule 2BBB of the Income Tax Rules, 1962. Considering the totality of the facts and circumstances of the case, the appellant is not eligible for claim of exemption u/s 10(23C)(iiiab) of the Act as Government Grants received by the appellant was 47.85% i.e. below 50% as laid down in Rule 2BBB of the Income Tax Rules, 1962.

5.9. The appellant further relied on the decisions of (i)Indian Institute of Management, Bangalore (2015) 370 ITR 81 (Karn.) (ii)Sikkim Manipal University v. ACIT (Kol.) and (iii) Shahrukh Khan v. DCIT (2006) 25 CCH 506(Mum.); (2007) 13 SOT 61 (Mum.) in ITA No. 202/Mum./2003 dated 20.07.2006. Further, the appellant submitted that the year grant was worked out at 48% , there was another working of cumulative grant till 31.03.2016 which has been worked out at 58% and 59% excluding and including value of land. In this connection, attention is drawn to Section 10(23C)(iiiab) and clarification issued by the CBDT wherein for the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution. hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year. if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be. during the relevant previous year. The Act or the sifslar never mentioned about the cumulative grant but the grant received during the previous year. In the instant case, the total grants received by the appellant come to 47.85% which is below 50% and hence failed to fulfil the requirement of Section of ‘wholly or substantially financed by the Government’. In view of the foregoing discussion, the appellant is not eligible for exemption u/s 10(23C)(iiiab). Accordingly. the grounds raised by the appellant in this regard are dismissed.

5.10. Since the case has been decided, the question of stay is inconsequential. Hence, the ground raised in this regard is dismissed.

5.11. In the last ground, the appellant craves leave to add/alter any of the grounds of appeal on or before the date of hearing, which the appellant has not done. Hence, this ground of appeal is hereby dismissed.

6.0 In the result, the appeal is dismissed. “

10. The same fate had also occurred for A.Y. 2017-18 at the first appellate stage vide order of the Ld. CIT(Appeals)/NFAC, dated 17.09.2025 in ITA No.691/RPR/2025, A.Y.2017-18 and the only difference is, in that year, total grant received by the assesse from the Government during previous year was only 9.77% being far below the applicable limit of 50% and hence, failed to fulfil requirement of the relevant provisions. The relevant findings of the Ld. CIT(Appeals)/NFAC for the said year is extracted as follows:

“5.9. The appellant further relied on the decisions of (i)Indian Institute of Management, Bangalore (2015) 370 ITR 81 (Karn.) (ii)Sikkim Manipal University v. ACIT (2013) (Kol.) and (iii) Shahrukh Khan v. DCIT (2006) 25 CCH 506(Mum.); (2007) 13 SOT 61 (Mum.) in ITA No. 202/Mum./2003 dated 20.07.2006. Further, the appellant submitted that the year grant was worked out at 9.77%, there was another working of cumulative grant till 31.03.2017 which has been worked out at 55% and 55% excluding and including value of land. In this connection, attention is drawn to Section 10(23C)(iiiab) and clarification issued by the CBDT wherein for the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution. hospital or other institution referred therein, shall be considered, as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year. The Act or the circular never mentioned about the cumulative grant but the grant received during the previous year. In the instant case, the total grants received by the appellant come to 9.77% which is below 50% and hence failed to fulfil the requirement of Section of ‘wholly or substantially financed by the Government’. In view of the foregoing discussion, the appellant is not eligible for exemption u/s 10(23C)(iiiab). Accordingly, the grounds raised by the appellant in this regard are dismissed.”

11. At the time of hearing, the Ld. Counsel for the assessee submitted that the Revenue authorities had erred in not providing exemption to the assessee u/s.10(23C)(iiiab) of the Act since grants received from the Government should not be considered only for the previous year but the entire grants received from the Government cumulatively till the relevant previous year from inception is required to be considered. In other words, what the assessee contends through its Ld. Counsel that Government grants for the previous year should not be considered alone but the cumulative grants from inception till the relevant previous year should have to be considered. In this regard, the Ld. Counsel for the assessee heavily relied on the decision of the Hon’ble High Court of Karnataka in the case of CIT v. Indian Institute of Management [2015] 370 ITR 81 (Karnataka), wherein the phrase “substantially financed by the Government” has been dealt upon.

12. Per contra, the Department had relied on the orders of the subordinate authorities.

13. We have heard the submissions of the parties herein, analyzed the facts and circumstances in these cases and carefully considered all the documents on record including the written submissions. In both these cases, exemption claimed by the assessee u/s. 10(23C)(iiiab) of the Act has been denied since the assessee had failed to fulfil requirement of Section “being wholly and substantially financed by the Government”. That before entering into the realm of adjudication, it is pertinent to extract the relevant provisions for the sake of completeness which reads as follows:

“Incomes not included in total income.

10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(23C) any income received by any person on behalf of—

(xxx) (xxx) (xxx) (xxx) (xxx)

(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or”

(iiiac) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, and which is wholly or substantially financed by the Government.

Explanation.—For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year; or”

14. That from a plain reading of the aforesaid provisions i.e. Section 10(23C)(iiiab) read a/w. Explanation which also covers the purpose of Section (iiiac), it is crystal clear that the legislature has ended the confusion regarding interpretation of the term “substantially financed by the Government” for previous year by stating that if the Government grants to such university or educational institution etc. exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, “during the relevant previous year”. This has to be read with Rule 2BBB of the Income Tax Rule, 1962 which prescribes percentage of the Government grants for considering as “substantially financed by the Government” The said Rule 2BBB of the Income Tax Rules, 1962 is extracted as follows:

“Percentage of Government Grant for considering university, hospital, etc., as substantially financed by the Government for the purposes of clause (23C) of section 10.

15. Therefore, specifically Rule 2BBB of the Income Tax Rules, 1962 spells out that such Government grants should exceed 50% of the total receipts during relevant previous year in order to constitute “substantially financed by the Government” for the purpose of Section 10(23C) (iiiab) & (iiiac) of the Act. Therefore, reading Explanation to sub-section (iiiab) & (iiiac) of Section 10(23C) a/w. Rule 2BBB of the Income Tax Rules, 1962, it is crystal clear what exactly constitutes a university, educational institution, hospital etc. being “substantially financed by the Government” is that such grants from Government in the previous year should exceed 50%. Therefore, intent of the legislature is unambiguous and therefore only strict interpretation of the provisions in this regard had to be resorted to. The legislature does not say cumulative grant of the Government but it is the Government grant for the relevant previous year only that has to be considered. In fact, the Government had issued circular vide FINANCE (NO.2) ACT, 2014 – EXPLANATORY NOTES TO THE PROVISIONS OF SAID Act, CIRCULAR NO.1/2015 [F.N0.142/13/2014-TPL], DATED 21-1-2015, wherein the Government has realized that absence of a definition of the phrase “substantially financed by the Government” had led to litigation and varying decisions of judicial authorities. Accordingly, the Government has clarified as follows:

“6.3 Therefore, clause (23C) of section 10 has been amended by inserting an Explanation below sub-clause (iiiac) of the said clause. It provides that if the Government grant to a university or for that previous year. Vide notification No.79 /2014 dated 12.12.2014, Rule 2BBB has been other educational institution, hospital or other institution referred to in section 10(23C)(iiiab) or 10(23C)(iiiac) during any previous year exceeds a prescribed percentage of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government inserted in the Income-tax Rules. The said Rule provides that any university or other educational institution, hospital or other institution referred to in sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10 of the Income-tax Act shall be considered as being substantially financed by the Government for any previous year if the Government grant to such university, hospital, or institution exceeds 50 per cent of its total receipts, including any voluntary contributions, during the said previous year.”

16. That Section 10(23C)(iiiab) with Explanation therein a/w. Rule 2BBB shall apply to A.Ys.2016-17 & 2017-18.

17. That in the lead case for adjudication i.e. A.Y.2016-17, admittedly grants received from Government for the relevant previous year comes to 47.85%, hence below 50% and therefore, in contravention to Rule 2BB of the Income Tax Rules, 1962 r.w.s. 10(23C)(iiiab) and Explanation thereto, the assessee had failed to fulfil the requirement of the relevant provisions of being “wholly and substantially financed by the Government” and accordingly, the assessee is not eligible for exemption u/s.10(23C)(iiiab) of the Act. The Hon’ble Apex Court in the case of DIT (IT) v. American Express Bank Ltd. (SC)/Civil Appeal No. 8291 of 2015, dated 15.12.2025 has held that taxation statutes must be interpreted strictly and that where the words are plain and unambiguous, the Court is bound to give effect to their plain meaning.

18. Reverting to the facts of the present case before us, on a plain reading to Section 10(23C) (iiiab) read with Explanation a/w. Rule 2BBB of the Income Tax Rules, 1962, it is absolutely clear that what shall constitute university, institution, hospital etc. being “substantially financed by Government”. There is no ambiguity at all that such Government grants in the previous year has to exceed 50% and only the grants for the previous year received from the Government has to be considered and it is not the cumulative grant from inception to the present year as had been argued by the Ld. Counsel for the assessee. It is the wrong interpretation of the said provisions and intent of legislature forwarded by the Ld. Counsel for the assessee which if accepted shall defeat the purpose of the provisions itself. Since these are the clear provisions, therefore, the fiscal statutes has to be interpreted in its strictest from only. Further, the Hon’ble Apex Court in the aforesaid decision (supra) had also observed that the statutory language must be interpreted in their specific context and not in isolation. The legislative intent, as held by the Hon’ble Bench comprising of Hon’ble Justice J.B. PARDIWALA & Hon’ble Justice K.V.VISWANATHAN is primarily to be gathered from specific words employed by Legislature.

19. That in the present scenario before us, Section 10(23C) (iiiab) of the Act provides twin conditions to get exemptions viz. (i) it is existing solely for educational purposes and not for purposes of profit; and (ii) it is wholly or substantially financed by the Government. That there is no dispute with regard to the first part as observed by the Department, therefore, for the time being, we are not concentrating on that aspect. The problem is with regard to the other part i.e. whether the assessee is wholly or substantially financed by the Government. To this, Explanation to (iiiab) clarifies that in order to be “substantially financed by the Government” such institution should get substantially financed or entirely financed in the relevant previous year exceeding such percentage of total receipts. Rule 2BBB of the Income Tax Rules, 1962 provides exactly what is the percentage that should be accepted in order to qualify for such exemption u/s.10(23C)(iiiab) r.w. Explanation thereto and that such grants as per Rule 2BBB should exceed 50% of the grants received from Government during the relevant previous year. That on this count itself, the assessee becomes ineligible for exemption claimed since twin conditions for getting exemption u/s.10(23C)(iiiab) r.w. Explanation a/w. Rule 2BBB is not fulfilled in the case of the assessee. That in A.Y.2016-17, the Government grants are only 47.85% in the previous year. That for A.Y.2017-18, the Government grants are only 9.77% in the previous year. The assessee is ineligible for exemption u/s.10(23C)(iiiab) of the Act for both the years in appeal.

20. The decision in the case of Hon’ble High Court of Karnataka in the case of Indian Institute of Management (supra) relied on by the Ld. Counsel for the assessee is substantially different on facts and parameters of adjudication. Firstly, in the substantial question of law before the Hon’ble High Court, it pertains to Section 10(23C)(iiiab) only and there is no reference of the Explanation thereto nor there is any reference of Rule 2BBB of the Income Tax Rules, 1962. Secondly, at Para 6 of the said judgment, the Hon’ble High Court observed that the assessee is a public institution, the Revenue generated by the institution belongs to the consolidated fund of India. We have analyzed and carefully scrutinized the financials and balance sheet of the assesse wherein it is found that there is substantial profit which is earned by the assessee and the Ld. Counsel submitted that this profit element is not refunded to the Government account. Therefore for the 1^st limb of Section 10(23C) (iiiab) also i.e. whether the institute is a profit earning body that part should be diligently scrutinized further by the Department. Be that as it may, therefore, the facts in the referred judgment by the Ld. Counsel for the assesse are substantially different from the present case before us, hence, cannot come to the rescue of the assessee.

21. That in both the years of appeals, the assessee has not fulfilled the requirements of Section 10(23C)(iiiab) read with Explanation a/w. Rule 2BBB of the Income Tax Rules, 1962, hence, the Ld. CIT(Appeals)/NFAC had rightly denied exemption to the assessee. Therefore, we do not find any infirmity in the order of the Ld. CIT(Appeals)/NFAC, for both the years which are upheld.

22. That as per above terms, grounds of appeal assailed by the assessee in both appeals are dismissed.

23. In the result, the appeals of the assessee are dismissed.